When private equity leaves you $7 billion in debt with $500 million in annual payments, that's not much left to pay extra store staff and upgrade the shopping experience. Blame Mitt Romney and his business buddys, not the poor retail managers trying to figure out how to run a store with their hands tied behind their backs.

I wonder what will happen with a certain large grocery chain that private equity has also put into significant debt, long term. We see how a smaller scale of a similar situation is ending for Winn Dixie...

A lot of Albertsons' debt (that is who what we're talking about, right?) was assumed between buying Safeway and New Albertsons. And even if it does end up buying Rite Aid, at least that debt is actually added to a chain that is growing. This isn't a defense of Albertsons' debt but the circumstances are very different from Toys R Us (or Winn-Dixie). A lot of Winn-Dixie's problems on the other hand was never following up on "bold, new prototypes" and then just doing cheap remodels. If they had stuck to their guns with the first big new prototype (the late 2000s one with the "freshly ________" inside, as well as continuing to pull out markets and close stores that weren't working, then maybe, maybe even after merging with BI-LO, they might have gotten the chain sold to someone like Kroger. Back on Toys R Us, I don't think it was solely private equity investors' fault that Toys R Us died. Like buying FAO Schwarz, Toys R Us Express, and likely others that just eroded the chain.

When private equity leaves you $7 billion in debt with $500 million in annual payments, that's not much left to pay extra store staff and upgrade the shopping experience. Blame Mitt Romney and his business buddys, not the poor retail managers trying to figure out how to run a store with their hands tied behind their backs.

I wonder what will happen with a certain large grocery chain that private equity has also put into significant debt, long term. We see how a smaller scale of a similar situation is ending for Winn Dixie...

A lot of Albertsons' debt (that is who what we're talking about, right?) was assumed between buying Safeway and New Albertsons. And even if it does end up buying Rite Aid, at least that debt is actually added to a chain that is growing. This isn't a defense of Albertsons' debt but the circumstances are very different from Toys R Us (or Winn-Dixie). A lot of Winn-Dixie's problems on the other hand was never following up on "bold, new prototypes" and then just doing cheap remodels. If they had stuck to their guns with the first big new prototype (the late 2000s one with the "freshly ________" inside, as well as continuing to pull out markets and close stores that weren't working, then maybe, maybe even after merging with BI-LO, they might have gotten the chain sold to someone like Kroger. Back on Toys R Us, I don't think it was solely private equity investors' fault that Toys R Us died. Like buying FAO Schwarz, Toys R Us Express, and likely others that just eroded the chain.

Toys R Us is a different model than a grocery store, for sure. While grocery stores are exceptionally good at generating a lot of cash flow all the time, Toys R Us is a business that generated pretty poor cash flow during large periods of time during the year.

I think there is a big difference in how the two private equity firms have operated Albertson's and Winn-Dixie.

In WD's case it appears they borrowed money to pay themselves with dividends and management fees and then didn't invest enough back into the operation.

In Albertson's case most of the debt was incurred with acquisitions to grow the company. They have also been more transparent with their financial reporting because they were trying to do an IPO. I do think this is a risky long term strategy, however. They are going to be very vulnerable when the next economic downturn happens because their pricing is too high and they don't have the flexibility to lower them unless they can get out from under a lot of that debt. They're also vulnerable if interest rates go up even if the economy continues to grow as it has for the last nine years.

"Billionaire Isaac Larian, the toy marketer whose lineup includes Little Tikes and Bratz dolls, offered to save part of Toys "R" Us from liquidation with an almost $900 million bid for stores in the U.S. and Canada."